Spot Ethereum ETF Debuts Hinge on Fast Replies: Gensler

Spot Ethereum ETF Debuts Hinge on Fast Replies: Gensler

The speed at which applicants answer SEC questions determines their approval speed, Chair says.

ETF.com
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Contributing Editor
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Reviewed by: etf.com Staff
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Edited by: James Rubin

Potential approvals of spot Ethereum exchange traded funds will depend on how quickly issuers address questions raised by the Securities and Exchange Commission, agency Chair Gary Gensler said in an interview. 

The agency is currently weighing S-1 registration statements that detail disclosures and are considered a formality toward final approval. The process still generally requires multiple back-and-forth exchanges between the agency and potential issuers. 

"These registrants are self-motivated to be responsive to the comments they get, but it's really up to them how responsive they are," Gensler told Reuters Wednesday. He didn't say whether final approval would take weeks or months. 

Gensler's comments came just two weeks after the SEC approved a rule change submitted by the Nasdaq, NYSE and CBOE, where the new spot ether funds would be listed. That decision represented a shift in the regulator's attitude toward the spot Ethereum funds, which are based on the ongoing price of ether, the world's second largest cryptocurrency by market value and the native token of the Ethereum smart contracts blockchain. 

Ether was recently trading at about $3,840, up the better part of a percentage point over the past 24 hours. It has risen nearly 25% during the past month with most of those gains coming as investor optimism rose about the prospects of an SEC greenlight for the new funds. In January, the agency approved spot bitcoin ETFs, which have generated a massive $15 billion in inflows. 

CoinMarketCap: Ether price

Observers of the Ethereum ETF saga have speculated cautiously that a final approval might occur by the end of June.

"I don't know a timeline," Bloomberg ETF Analyst James Seyffart wrote in an email exchange with etf.com. "I'm inclined to think they are approved within a month, or something, but I really don't know." 

Seyffart added that he expected the funds "all launch at once or, at the very least, multiple at once."

Ongoing Concerns About Crypto

In a separate interview on CNBC Wednesday, Gensler said that the SEC had considered the presence of Ethereum futures in reaching a decision about the rules change. 

"Ethereum had been traded on the Chicago Mercantile Exchange futures for three plus years, and this staff looked at that clearly," Gensler said. "The underlying exchange traded products still need to go through a process to have the disclosure about that and that will take some time, but they're working on that."

The rule change eliminated staking rewards, a high-risk strategy in which investors use ether as collateral to validate transactions on the blockchain and addressed longstanding SEC concerns about fraud and market manipulation. 

Read More: SEC Changes Ethereum Rule, Sets Stage for ETF Approval | etf.com

Gensler reiterated his worries in the CNBC interview about crypto-based investments and important role that the SEC plays in protecting investors. 

"Exchanges...get properly regulated to protect against fraud and manipulation and they don't trade against you," he said speaking from the floor of the New York Stock Exchange. "And these crypto exchanges are doing things we would never allow this New York Stock Exchange to do."

James Rubin is a contributing editor for etf.com, where he produces the Morning Exchange and Weekly Exchange newsletters. A longtime financial writer, editor and book author, he formerly held positions as a news and markets editor for the Americas at CoinDesk, where he focussed on cryptocurrencies. 

He provided editorial guidance for a Wall Street Journal best-selling book on Bitcoin and oversaw a startup newsroom focused on digital financial assets. He has edited for TheStreet and Unchained, where he wrote daily news stories about the trial of fallen crypto entrepreneur Sam Bankman-Fried. His writing has also appeared in The Hollywood Reporter, Forbes.com, AdWeek, Bankrate, The Financial Brand and The Wall Street Journal. He has also written for Forbes Insights and the Economist Intelligence Unit, including papers presented at World Economic Forums in Davos and Mumbai. 

James is the co-author of The Urban Cyclist’s Survival Guide (Triumph Books) and has been interviewed about bike safety on a number of NPR affiliates. In a prior career, Rubin was a world-ranked tennis player, once competing in Wimbledon’s qualifying rounds. He speaks fluent German and is a graduate of the Columbia University Graduate School of Journalism and received his BA at Columbia University.